The political economy of monetary integration in the EU and implications for Cyprus

The political economy of monetary integration in the EU and implications for Cyprus

by Andreas Theophanous

The European Economic and Monetary Union (EMU) in many ways constitutes a unique experiment in economic history, representing a case of monetary union without a comprehensive political union, but with a single currency and a common monetary authority. The EMU had run ahead of fiscal and financial integration and happened at a time of diverse economic records and circumstances in Europe. In the process, rather inevitably, considerable costs were created for several countries. However, multiple benefits have accrued to its member countries over time. The EMU has forged the necessary nominal policy anchor for macroeconomic stability, increased transparency, enhanced competition, and has helped develop integrated capital markets, induce structural change and stimulate productivity growth.